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                      DRILLING LEASE NO. 224-B AS MODIFIED


                                     BETWEEN


                    TRUSTEES OF THE INTERNAL IMPROVEMENT FUND

                             OF THE STATE OF FLORIDA


                                       AND


                            COASTAL PETROLEUM COMPANY



                                   -----------




                                February 27, 1947







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<PAGE>



                      DRILLING LEASE NO. 224-B AS MODIFIED

      WHEREAS,  pursuant to the  provisions of Chapter  20680,  Laws of Florida,
Acts of 1941, for a valuable  consideration  therein stated, the Trustees of the
Internal  Improvement  Fund of the State of Florida,  as Lessor,  and Arnold Oil
Explorations, Inc., a Florida corporation having its principal place of business
in Groveland, Florida, now Coastal Petroleum Company with its principal place of
business in St. Petersburg, Florida, as Lessee, duly executed Drilling Lease No.
224-B,  dated the 27th day of March, 1946, which said lease is now in full force
and effect, and all rentals due thereon have been duly paid, and

      WHEREAS,  the United  States of  America  has made claim to the title to a
large part of the areas  included  within said lease,  and  WHEREAS,  the United
States of America has filed suit against the State of  California,  being No. 12
Original,  1945  Term,  which  suit  involves  the  title to and oil  rights  of
Tidewater Lands of the State of California, (but may affect the title to a large
part of the areas included within the said lease) and

      WHEREAS, such litigation renders the reformation of the Drilling Blocks as
described  in Lease  No.  224-B  expedient  and  desirable  for the  purpose  of
permitting  immediate  drilling  thereunder while maintaining  within such lease
provisions  the areas  included in such Drilling  Blocks  pending the outcome of
such  litigation  and assures to the said parties a reasonable  area around each
well drilled the title to which is not questioned in such suit, and

      WHEREAS,  certain  other  provisions  of said lease  appear  difficult  of
construction, and require clarification as between the said parties, and

      WHEREAS,  it is the purpose and intent of the said  parties to modify said
lease in certain particulars only to permit a practical performance thereof, but
not to  extinguish  said  lease,  nor to relieve  the  parties  thereto of their
obligations thereunder, but to render the same more certain and explicit, and

      WHEREAS,  it is the purpose  and intent of the said  parties to ratify and
confirm,  with the modifications  hereinafter shown, the said Drilling Lease No.
224-B.

      Now, THEREFORE,  said lease is hereby modified in certain particulars only
so that the same shall now read as follows:

      "THIS  AGREEMENT,  Made and  entered  into in  duplicate  this 27th day of
March, A. D. 1946, by and between the Trustees of the Internal  Improvement Fund
of the State of Florida,  hereinafter called 'TRUSTEES' or 'LESSORS', and ARNOLD
OIL  EXPLORATIONS,  INC., a Florida  corporation,  having its principal place of
business in Groveland, Florida, hereinafter called 'LESSEE'.


<PAGE>

                                   WITNESSETH:

      For and in consideration of the sum of Five Hundred  ($500.00) Dollars per
drilling block as hereinafter  described,  to them in hand paid, receipt whereof
is hereby acknowledged, together with the covenants, agreements and stipulations
hereinafter contained,  as well as in further reference to and in pursuance of a
certain  EXPLORATION  CONTRACT  FOR OIL,  GAS AND  MINERALS AND OPTION TO LEASE,
heretofore  executed between  Trustees and Lessee,  the same being dated the 4th
day of October,  1941, said Trustees,  under authority of Chapter 20680, Laws of
Florida,  Acts of 1941, have leased, and by these presents do hereby lease, unto
said Lessee for the sole and only purpose of prospecting,  drilling,  mining and
operating  for the  production  of oil,  gas and  sulphur,  laying  pipe  lines,
building tanks, roads, power stations and structures thereon,  but not including
bulkheading  and filling water bottoms except when express  permission  therefor
has been obtained from Trustees,  as may be necessary to produce,  save and take
care of said  products and taking the  production  thereof,  those certain areas
referred  to  in  said   Exploration   Contract  as  DRILLING  BLOCKS  and  more
particularly described as follows, to wit:
      All  water  bottoms  of the Gulf of Mexico  within  three  leagues  (10.36
statute  miles) of the ordinary high water mark of the outermost  shore included
within  Drilling  Blocks 5, 6, 7 and 8 inclusive as said drilling  blocks appear
upon a map which is attached hereto and made a part of this lease.
      Also all submerged lands and water bottoms of all bays,  sounds and bayous
of the Gulf, and adjacent  Government  waterfront  lots  contiguous to the water
bottoms of the Gulf of Mexico herein first  described in Drilling Blocks 5, 6, 7
and 8 as said  drilling  blocks  appear upon a map which is attached  hereto and
made a part of this lease.
      Also the bottoms of and water bottoms  adjacent to the rivers  hereinafter
named which flow through natural channels in the Gulf of Mexico, to wit: Myakka,
Manatee,  Little  Manatee,  Alafia,  Caloosahatchee  (from its month to  LaBelle
Bridge),  Peace River to Township 29/30, included within said Drilling Blocks 5,
6, 7 and 8 as shown on said map.
      The Lessor  finds and it is agreed that Lease 224-B prior to  modification
was intended to include all lands submerged and unsubmerged  which are described
herein,  and that all lands  submerged  and  unsubmerged  which were included in
Lease 224-B prior to  modification  including but not by way of  limitation  all
areas  described  therein as Drilling  Blocks 14-A to 24-A  inclusive,  Drilling
Blocks 1-B to 7-B inclusive,  the south portion of Drilling Block 8-B and all of
Drilling Blocks 1-C and 2-C are included herein.
      This lease covers the area included between the northern boundary of Lease
224-B prior to modification,  which is the projection westward from the shore of
the township line between  Townships 25 and 26 South;  the southern  boundary of
said lease  prior to  modification,  which is  Latitude  26(degree)  North;  the
western, or off-shore boundary, shall be a line 10.36 statute miles seaward from
the outermost land; the eastern boundary shall include the areas as described in
Exploration Contract No. 224, dated October 4, 1941.


<PAGE>

      DRILLING BLOCK NO. 5 of said lease shall include the area as follows:

               Bounded on the north by the southern  boundary of Lease No. 224-A
         prior to modification,  which is the projection westward from the shore
         of the township line between Townships 25 and 26 South; on the south by
         the  projection  westward  from the shore of the township  line between
         Townships 31 and 32 South; the western, or off-shore boundary, shall be
         a line 10.36 statute miles seaward from the outermost land; the eastern
         boundary  shall include the area as described in  Exploration  Contract
         No. 224, dated October 4, 1941.

      DRILLING BLOCK NO. 6 of said lease shall include the area as follows:

               Bounded on the north by the southern  boundary of Drilling  Block
         No. 5 as herein  defined;  on the south by the western  projection from
         the shore of the township line between  Townships 38 and 39 South;  the
         western,  or off-shore  boundary,  shall be a line 10.36  statute miles
         seaward from the outermost land; the eastern boundary shall include the
         area as described in  Exploration  Contract No. 224,  dated  October 4,
         1941.

      DRILLING BLOCK NO. 7 of said lease shall include the area as follows:

               Bounded on the north by the southern  boundary of Drilling  Block
         No. 6 as herein defined;  on the south by the western projection of the
         township  line  between  Townships  44 and 45 South;  the  western,  or
         off-shore  boundary,  shall be a line 10.36  statute miles seaward from
         the  outermost  land;  the eastern  boundary  shall include the area as
         described in Exploration Contract No. 224, dated October 4, 1941.

      DRILLING BLOCK NO. 8 of said lease shall include the area as follows:

               Bounded on the north by the southern  boundary of Drilling  Block
         No. 7 as herein defined; on the south by the southern boundary of Lease
         No. 224-B prior to modification,  which is Latitude  26(degree)  North;
         the western, or off-shore boundary, shall be a line 10.36 statute miles
         seaward from the outermost land; the eastern boundary shall include the
         area as described in  Exploration  Contract No. 224,  dated  October 4,
         1941.

      All rivers,  sloughs, arms and overflow lands included in the above blocks
are to be  considered a part of that  particular  drilling  block into which the
respective river, slough, arm or overflow land drains or empties.
      The lease and its  subdivision  into  drilling  blocks  are shown on a map
attached hereto and made a part hereof.
        Each drilling  block shall comprise all coastal  off-shore  areas of the
Gulf of  Mexico,  together  with  all  bars,  islands  and  adjacent  Government
waterfront lots contiguous thereto;  all bays, bayous,  sounds and inlets of the
Gulf,  together with all connecting  sloughs,  flats and/or the overflow  and/or
submerged  lands,  all bars and islands and all adjacent  Government  waterfront
lots contiguous to such areas; all rivers and lakes named herein,  together with
all connecting sloughs, arms and overflow lands located in such waters.
      It is  mutually  covenanted,  understood  and  agreed by and  between  the
respective  parties  hereto  that  the  terms  of this  lease be and they are as
follows:


<PAGE>

                                       -1-

      In consideration of the sum hereinbefore stated, the work herein agreed to
be performed,  the royalties  herein  provided for, and all other  agreements of
Lessee  herein  contained,   said  Trustees  do  hereby  grant,  lease  and  let
exclusively  unto Lessee and Lessee's  successors  and  assigns,  subject to the
express   permission   requirements   herein  contained,   those  certain  areas
hereinbefore described,  for the purpose of drilling for and producing therefrom
oil, gas, sulphur,  casinghead gas and casinghead gasoline, together with rights
of way and easements  for roads,  pipe lines,  telephone  and  telegraph  lines,
tanks,  power  houses,  stations,  gasoline  plants and fixtures for  producing,
treating and caring for such  products,  as well as any and all other rights and
privileges  necessary and incident to or convenient for the economical operation
of such  areas,  alone or  conjointly  with  neighboring  areas,  for oil,  gas,
sulphur,  casinghead gas and casinghead gasoline;  and with the further right to
inject water, gas or air into sub-surface strata, provided such injections in no
way damage any water or intrude any  structure  containing  water  suitable  and
necessary for either present or future domestic requirements.

                                       -2-

        Subject to the other provisions  herein  contained,  this lease shall be
for a term  of five  (5)  years,  computed  from  March  27,  1946,  hereinafter
sometimes referred to as the primary term, and as to each DRILLING BLOCK as long
thereafter as oil, gas or other minerals are produced from such Drilling  Block,
subject to renewal  thereof for periods of five (5) years each,  as  hereinafter
provided.

                                       -3-

        Lessee agrees to drill at least one (1) test well on each Drilling Block
within the first five year period of this  lease,  and to drill at least one (1)
additional well in each succeeding five (5) year renewal period hereof upon each
separate  Drilling  Block  until the total  number  of wells  drilled  upon each
Drilling  Block shall equal  one-half  (1/2) the number of sections of land,  or
equivalent, embraced in such Drilling Block.
        Lessee  at the time the  drilling  of each well on a  Drilling  Block is
commenced shall file with Trustees a written declaration describing the Drilling
Block and the  sections of land  thereof to which such well shall  apply.  If no
well shall be commenced within the first five (5) year period of this lease, all
rights to renew this lease shall become unenforceable and the entire lease shall
be void,  and if during each  subsequent  five (5) year renewal period hereof no
well or wells be commenced as required  herein,  such renewal lease  contract in
its entirety  shall become  terminated as to any area in such Drilling Block not
in a status conformable in this particular with the requirements of this lease.
      The location of well or wells in each  Drilling  Block is at the option of
Lessee.  Said  well or  wells  shall be  drilled  to a depth  not less  than six
thousand (6,000) feet, when drilling is specified unless oil, gas or sulphur has
been found in paying  quantities  or igneous rock,  or Paleozoic  formation,  or
formations not susceptible of being drilled with first-class  drilling equipment
is encountered at a lesser depth.

<PAGE>

      If drilling operations on the said test well are not commenced within five
years  from  March  27,  1946,  and  continued  thereafter  to  completion  with
reasonable  diligence and in a  workmanlike  manner to discover and develop said
premises  for the  production  of oil,  gas or  sulphur  until  such  wells  are
completed or abandoned, the entire lease shall be void, provided,  however, that
if the Lessee shall have commenced drilling  operations during the primary term,
which after  completion shall comprise in the aggregate 24,000 feet of hole, all
drilling  obligations  herein  required during the prilnary term shall have been
met and said lease shall be renewed  for the ensuing  five year period as to all
of the Drilling Blocks described herein. Thereafter, if drilling operations on a
well or wells are not  commenced  within each five year  period,  and  continued
thereafter to completion with reasonable  diligence and in a workmanlike  manner
to discover and develop such premises for the  production of oil, gas or sulphur
until such wells are  completed  or  abandoned,  the entire lease shall be void,
provided,  however,  that if the Lessee shall have commenced drilling operations
during  the  said  term of five  years,  or any  subsequent  term,  which  after
completion  shall  comprise in the aggregate  24,000 feet of hole,  all drilling
obligations  herein  required  during the said term shall have been met and said
lease shall be automatically renewed for the ensuing five year period, as to all
of the Drilling Blocks described herein.
      Notwithstanding  all  provisions  to the contrary,  it is understood  that
drilling of a total of 24,000 feet in wells  begun  during the primary  term and
drilling  of a total of 24,000 feet in  drilling  operations  begun in each five
year  term  thereafter  shall  operate  to  extend  this  lease as to all of the
Drilling Blocks described herein for an additional term of five years.  Drilling
operations  commenced  on any block or blocks  that  result in meeting the depth
requirement  herein  contained  shall  operate to hold that block and any excess
over 6,000 feet  drilled on any block shall  constitute  a credit and be applied
against the footage  Lessee is obligated to drill on any other drilling block in
said lease.
      What is termed a core hole, or hole for formation determination, shall not
be considered a well under the terms of this lease.
      The Lessor does  hereby  find that the plan of  drilling on said  Drilling
Blocks as herein set out is of advantage to the Lessor for the accomplishment of
the purpose of discovering  and producing oil on the premises  herein leased and
carries  out the real  intent  and  purpose of  Drilling  Lease  224-B  prior to
modification.

                                       -4-

      The royalties to be paid Trustees are:

               (a)  On Oil, if paid in kind,  one-eighth (1/8) of that  produced
         and saved from said land, the same to be delivered at the wells,  or to
         the  credit  of  Trustees  into the pipe line to which the lines may be
         connected;  Lessee  shall have the right from time to time to  purchase
         any  royalty  oil in  Lessee's  possession,  paying  the  market  price
         therefor  prevailing  for the  field  where  produced,  on the  date of
         purchase.


<PAGE>

               (b)  On  Gas,   including   casinghead   gas   or  other  gaseous
         substances,  produced from said land and sold or used off the premises,
         or in the manufacture  of gasoline  or other  products  therefrom,  the
         market value at the mouth  of the well of one-eighth  (1/8) of the gas,
         in its natural state, so sold or used, provided that on gas sold at the
         wells the royalty shall be one-eighth (1/8) of the amount of such sale;
         where gas, from a well producing gas only,  is not sold or used, Lessee
         must pay  as  royalty  One Hundred ($100.00) Dollars on such  well  per
         year,  and upon such  payment  it will be considered  that gas is being
         produced within the meaning of Paragraph 2 hereof for one five (5) year
         lease period if Lessee desires the renewing privilege of said paragraph
         with respect thereto.

               (c)  On Sulphur, the royalty shall  be fifty ($.50) per long ton,
         payable when mined.

               (d)  Any and all  cash payments hereunder  by Lessee to  Trustees
         shall be made by said Lessee to Trustees at Tallahassee, Florida.

               (e)  Lessee  shall  have the free use of oil,  gas and water from
         said lands,  when used in the operation of this lease,  which shall not
         be subject to royalty requirements hereof.

                                       -5-

      For the purpose of examining the production  therefrom,  Trustees or their
authorized  representatives  or agents at all reasonable times shall have access
to the wells, gauge books, oil and/or gas meters, tanks, reservoirs, sump holes,
building, and other structures and appliances placed upon the lands by Lessee.

                                       -6-

      Lessee  agrees to keep logs of any and all wells  drilled  upon the leased
premises,  which  said  logs  shall at all times be  subject  to  inspection  of
Trustees,  their  representatives or agents, and within such time as required by
law Lessee  shall  furnish  the  Trustees  with a copy of said log.  Lessee also
agrees to take regular samples of material encountered, at intervals not greater
than  thirty (30) feet,  and,  as each  sample is taken,  to forward to the said
Trustees a portion  thereof,  not less than  three (3) omices in weight,  within
such time as required by law,  marked to indicate the Drilling  Block from which
it is taken and the depth and the day the same is taken.  Lessee  further agrees
to keep true and correct  accounts of  petroleum  and/or gas, or other  valuable
substances  from each and every well  drilled on the leased  premises  where any
production is found and saved, which said accounts shall be open at all times to
the inspection of Trustees or their authorized representatives or agents.

                                       -7-

      The  total  area in said  Drilling  Blocks  5, 6, 7 and 8 is  agreed to be
1,974,360  acres,  whether the same is actually  later  determined to be more or
less, and the total annual rental thereon shall be $27,048.00, and which sum the
Lessor does hereby find is equal to the amount  provided to be paid as rental by
the Lessee under this lease before modification. No rentals shall be paid on any
area, or the portion of any area,  which Lessee has  surrendered  to Trustees as
herein  provided,  nor shall  Lessee be required to pay rentals on any  drilling
block wherein oil in commercial quantities is being produced.
      For rental purposes,  each drilling block shall be deemed to be one-fourth
(1/4) of the  total  acreage  and for any part of a  drilling  block at the rate
which that part bears to the whole.

<PAGE>

      The  drilling  of each well  shall be  prosecuted  with due  diligence  as
hereinbefore  required.  If the first and all  subsequent  wells  drilled on any
Drilling  Block  commenced  within  the  terms  of this  lease  and  before  the
expiration of five (5) years from this date, shall result as dry holes, then the
lease shall be extended as to such Drilling  Block for an  additional  period of
five (5) years under the terms and conditions as herein set out for such renewal
period.  The payment or tender of rental may be made by the valid check or draft
of Lessee  mailed or delivered to Lessor on or before such date of payment.  The
down cash payment at the time of executing this lease is consideration  for this
lease  according  to its terms and shall not be  allocated  as mere rental for a
period.
      This lease  contemplates  the  reasonable  development  of the oil and gas
underlying  the land  described in this lease  including the drilling of as many
wells as a  reasonably  prudent  operator  would drill under the same or similar
circumstances.  In the  event a well or  wells  producing  oil or gas in  paying
quantities should be brought in on adjacent land and within three hundred thirty
(330) feet of and draining the leased  premises,  or acreage  pooled  therewith,
Lessee agrees to drill such offset wells as a reasonably  prudent operator would
drill under the same or similar circumstances.

                                       -8-

      On what are commonly termed coastal and tide water areas, no well shall be
begun nearer than two hundred  (200) feet from the  ordinary  high water mark of
the shore,  nor for lake and river  areas,  nearer than fifty (50) feet from the
ordinary high water mark,  without the written consent of the owner of adjoining
upland;  nor shall any well be begun  within  one-eighth  (1/8) of a mile of the
shore line in front of any village of five (5) or more  families;  and where the
majority of the  dwelling  houses  occupied by said  families are each less than
three  hundred  (300) feet from  another of such  dwelling  houses,  without the
written consent of the owners of the water front upland situated one-fourth (14)
of a mile  each way from a line  drawn  from the well to the  shore  line at the
nearest  point;  nor shall any well be begun within the corporate  limits of any
municipality  without the written consent of the governing  authorities thereof.
No well shall be begun  nearer than two hundred  fifty (250) feet from the right
of way of any State Highway  without the consent of Lessors.  The inhibitions of
this paragraph  shall not apply where producing wells shall have been drilled on
lands,  not included in this lease,  within two hundred  fifty (250) feet of the
inhibited area.

                                       -9-

      Except as may  otherwise  be provided  herein,  Lessee  shall  procure all
necessary permits from the Federal Government and assume all responsibilities to
the Federal Government  incident to the operations of this lease, but the Lessor
shall cooperate in securing such permits.

                                      -10-

      Lessee  shall  have the  right at any time to  remove  all  machinery  and
fixtures  placed by  Lessee  on said  leased  premises,  including  the right to
withdraw and remove casing.


<PAGE>

                                      -11-

      Any well or hole,  after  being  drilled,  unless in  operation,  shall be
securely  capped,  or if casing is  removed,  shall be  permanently  and tightly
sealed  to the  satisfaction  of  Trustees  in such  manner  and so placed as to
prevent  escape of salt water or  undesirable  material to the  surface,  or its
intrusion into any sub-surface  structure  bearing water in sufficient  quantity
and of quality suitable for domestic purposes.

                                      -12-

      Lessee  shall bury his pipe line not less than  fifteen  (15) inches below
ground surface, or if water areas are traversed, said pipe line shall be so laid
that no obstruction to navigation or use of waterway will result therefrom.

                                      -13-

      The rights of either party  hereunder  may be assigned in whole or in part
only after written consent thereto from the Trustees is first obtained;  and the
provisions  hereof  shall  extend to the  successors  and assigns of the parties
hereto,  but no change or division in ownership  of land  rentals or  royalties,
however  accomplished,  shall operate to enlarge or diminish the  obligations or
the rights of either  party.  Neither  this  lease nor the work to be  performed
hereunder  shall in any way limit the right of said  Trustees to sell or dispose
of, or to lease for other  purposes than those herein,  any area or areas herein
described  or any part  thereof,  covered  by this  lease,  but in case of sale,
conveyance or lease by the said Trustees,  such sale,  conveyance or lease shall
be subject to this lease.
      In the  event of any legal  assignment  of this  lease as to a  segregated
portion of the area covered  thereby,  the rentals  payable  hereunder  shall be
apportionable as between the several  leasehold owners ratably  according to the
area of each,  and  deferment  of rental  payments  by one shall not  affect the
rights of other leasehold owners hereunder.

                                      -14-

      The breach by Lessee of any obligations  arising  hereunder shall not work
as a  forfeiture  or  termination  of this  lease,  nor cause a  termination  or
reversion of the estate created hereby,  nor be grounds for cancellation  hereof
in  whole or in  part,  except  as  otherwise  provided  herein  and  except  as
forfeiture may be imposed by laws of this State.
      In the event the Trustees  consider that  operations  hereunder are not at
any time being  conducted in compliance  with this lease,  said  Trustees  shall
notify  Lessee in  writing of the facts  relied  upon as  constituting  a breach
hereof and Lessee, if in default,  shall have thirty (30) days after the mailing
or sending of such notice in which to commence  compliance  with the obligations
imposed by virtue of this  instrument.  If Lessee is in fact not complying  with
the terms of the lease and if  commencement  of  compliance  shall not have been
undertaken  by  Lessee  within  said  thirty  (30)  days,  and  pursued  to  the
satisfaction  of Trustees,  said Trustees  shall have the right without  further
notice  to  declare  this  lease  in  default  as to any part so  affected,  and
thereupon  all rights of Lessee  hereunder as to such part shall  terminate  and
cease.


<PAGE>

                                      -15-

      When drilling or other  operations  are delayed or  interrupted by lack of
water,  labor  or  material,   or  by  fire,  storm,   flood,  war,   rebellion,
insurrection,  riot, strike, differences with workmen, or failure of carriers to
transport  or  furnish  facilities  for  transportation,  or as a result of some
order, requisition or necessity of the Government, or as the result of any cause
whatsoever  beyond the  control of the  Lessee,  when  notice  thereof and claim
therefor  shall have been given to the Trustees  within  twenty (20) days of the
occurrence of the excusing cause,  the time of such delay or interruption  shall
not  be  counted  against  Lessee,  anything  in  this  lease  to  the  contrary
notwithstanding; EXCEPT, HOWEVER, as to requirements with respect to drilling as
provided in Chapter 20680, Laws of Florida, Acts of 1941.

                                      -16-

      Lessee shall have the right to surrender any portion of any area described
herein  without in any way  impairing  its rights  under this lease in remaining
parts or  portions.  In the event of  surrender  of any  portion,  Lessee  shall
execute to Trustees a release of the part or parts Lessee desires to surrender.

                                      -17-

      Lessee  shall  not  issue any stock or other  securities  to  finance  its
obligations  hereunder  prior to the production of gas, oil or other minerals in
paying  quantities  without the approval of the Trustees unless such issue meets
the  requirements  of the Federal  Securities  and  Exchange  Commission  or the
requirements of the "BLUE SKY LAWS" of any State where such stock may be sold.

                                      -18-

      Lessee  assumes   responsibility   for  all  damages  caused  by  Lessee's
operations  and will in all respects  save the  Trustees  harmless on account of
anything  growing out of this lease,  the source of which is the  operations  of
said Lessee.

                                      -19-

      No well  drilled  under the terms of this lease,  and capable of producing
oil, gas or sulphur in commercial  quantities,  may be closed and  production of
oil,  gas or sulphur  therefrom  curtailed,  without the written  consent of the
Trustees.


<PAGE>

                                      -20-

      Lessee agrees that it will on or before  September 1, 1947, start drilling
operations  on a  location  to be  selected  by it in this lease or in Lease No.
224-A,  dated  December 27, 1944, or in Lease No. 248,  dated December 19, 1944,
and that it will  prosecute  the drilling of such well with due  diligence.  The
agreements  to drill this well appear in  Paragraphs  Twenty (20) of this lease,
Lease 224-A and Lease 248 and refer to the same well and are not to be construed
as cumulative.  Lessee further agrees that it will commence drilling  operations
within the primary term of this lease that it will with due diligence thereafter
and upon  completion  accomplish the drilling of at least 24,000 feet of hole on
this lease. Lessee also agrees that thereafter at least one set of tools will be
employed  continuously  during the primary term of Leases  224-A,  224-B and 248
until at least 24,000 feet of hole has been drilled  here-under,  and that there
will not be an interruption of over 120 days, except for force majeure,  between
the  completion of one well and the beginning of drilling  operations on another
well on one of said leases.

                                      -21-

      It is understood that in any of the drilling  obligations  with respect to
the areas  covered by this lease,  Lessee may acquire the right to drill and may
drill on areas contiguous  thereto,  in which case the said drilling  operations
will be accepted as compliance  with the Lessee's  drilling  obligations  on the
areas  covered by this lease as to any one  Drilling  Block  conhguous  thereto,
provided that a 1/8 royalty in the well drilled is assigned to the State without
cost to the latter.

                                      -22-

      If any sentence,  paragraph,  clause or provision of this  Drilling  Lease
Number  224-B as  modified  shall be held  subject  to any laws of the  State of
Florida now in effect,  and enacted subsequent to October 4, 1941, and therefore
invalid,  then in such case the rights and  obligations of the Lessor and Lessee
as to the  subject  matter  of  such  invalid  sentence,  paragraph,  clause  or
provision shall be governed by the terms of Drilling Lease Number 224-B prior to
modification thereof, except that any time or times fixed for performance on the
part of  either  of the  said  parties  under  the  terms  of the  lease  before
modification  corresponding to such invalidated portions shall be extended for a
reasonable time after final adjudication of such invalidity to permit reasonable
compliance therewith.

                                      -23-

      WHEREAS,  the United States of America has made claim to the title to some
of the areas included within this lease, and

      WHEREAS,  the United States of America has filed suit against the State of
California,  being Number 12 Original,  1945 Term, which suit involves the title
to and oil rights of Tidewater Lands of the State of California,  but may affect
the title to some of the areas included within this lease, and

      WHEREAS, the Trustees recognize that said claim and suit may place a cloud
on the title to some of the areas included in this lease, and


<PAGE>

      WHEREAS,  Lessee does hereby agree to carry out their  obligations  herein
contained without claiming any release from any of said obligations on the basis
of the said possible cloud on title except as hereinafter  stated,  it is hereby
agreed by the Trustees  that:  If a decision  adverse to the State of California
shall be rendered in said suit by the Supreme Court of the United  States,  then
in such event the  Lessee is  relieved  from any duty to carry out its  drilling
obligations assumed under this lease as to any five year period except the first
five year period  hereof on any lands the title to which  appears to be affected
by  such  decision  and  the  rentals  herein   provided  for  shall  be  abated
proportionately  to the extent such decision  appears to divest title to part of
the lands hereby affected from the State of Florida, until such time as there is
a decision  rendered by the Supreme Court of the United States quieting title in
Lessor or the State of Florida to the areas affected by any adverse  decision in
the said suit against the State of California;  within sixty days after title to
said areas is so quieted in Lessor or the State of Florida, Lessee must commence
operations  to carry out the  drilling  obligations  of this  lease  and  resume
payment of the full rentals.

                                      -24-

      Lessor  finds as a matter  of fact  that  this  lease  as  modified  is of
material advantage to the State of Florida;  that within the primary term 24,000
feet of well hole must be drilled,  in  addition to payment of rentals,  whether
the wells are drilled or not, and that it is for the best  interest of the Trust
Fund  administered  by the Lessors that  exploration for and discovery of oil be
accomplished as soon as feasibly possible,  and that this lease, as modified, as
well as Leases 224-A and 248, as modified, most nearly serve such interest.

                                      -25-

      The Trustees also find, and it is agreed,  that the  modification  of this
lease is not, and is not intended to be, a new agreement or novation.

      IN WITNESS WHEREOF,  the Trustees of the Internal  Improvement Fund of the
State of Florida,  the Lessor,  have  hereunto  subscribed  their names and have
caused the seal of the  Department of  Agriculture of the State of Florida to be
hereunto  affixed,  and the Lessee has caused this  instrument to be executed in
its name by its Vice President,  and its corporate seal to be affixed,  attested
by its Secretary, as of the date aforesaid."


<PAGE>


      Executed this 27th day of February, A. D., 1947.

                                      MILLARD F. CALDWELL                 (SEAL)
                                                                Governor

                                      C. M. GAY                           (SEAL)
                                                             Comptroller

                                      J. EDWIN LARSON                     (SEAL)
                                                         State Treasurer

                                      __________________________________  (SEAL)
                                                        Attorney General

                                      NATHAN MAYO                         (SEAL)
                                             Commissioner of Agriculture


                                      ACTING  AS  AND   COMPOSING  THE  TRUSTEES
                                                OF THE INTERNAL IMPROVEMENT FUND
                                                OF THE STATE OF FLORIDA

                                                                  Lessor


                                      COASTAL PETROLEUM COMPANY
                                        (Formerly Arnold Oil Explorations, Inc.)

                                         By J. E. FITZ-PATRICK
                                                        Vice-President. 

                                                                  Lessee
Attest:

         BENJAMIN W. HEATH
             Secretary

Signed, Sealed and Delivered in the presence of:

         J. THOMAS GURNEY

         ANNIE LAURA FOSTER

Approved:

         JULIUS F. PARKER